CAG Scan Of The Private Sector

The Supreme Court’s ruled that the Comptroller and Auditor General of India can audit private telecom firms or even any entity using a public resource in its business and sharing revenue with the government.

The rationale behind this being that :

when the Executive deals with natural resources, such as spectrum, Parliament should be aware of how the country’s wealth has been dealt with,

the revenue generated from the resource has to be verified;

whether the revenue has been properly accounted for by the government and

the private licensee also needs to be found out.

This is a welcome decision in light of recent scams regarding spectrum and coal block allocations that were unearthed by the CAG. This was ruled owing to a dispute between a couple of telecom companies which the government suspected to be accounting for revenues in a manner that would lower their fee liability.

If the CAG and govt conducts these audits in a hassle-free manner, the audit may not be burdensome despite being an addition to the statutory audit under the Companies Audit.

The toughest task for the CAG will be in deploying adequate resources and talent in such audits when called upon by the government or the regulators, timely completion and submission of these reports and resorting to the audit only when confronted with a serious case of foulplay.